Question 1

Suppose the local pharmacy charges lower prices to senior citizens than it charges to younger customers. The pharmacy is practicing

Accepted Answer

A)  perfect price discrimination. 
B)  second-degree price discrimination. 
C)  arbitrage. 
D)  third-degree price discrimination. 
E)  non-cost discrimination. 
A)  perfect price discrimination. 
B)  second-degree price discrimination. 
C)  arbitrage. 
D)  third-degree price discrimination. 
E)  non-cost discrimination.

Question 2

Which of the following is not an example of a legal barrier to entry?

Accepted Answer

A)  a beautician's license 
B)  a patent 
C)  exclusive ownership of raw materials 
D)  a public franchise 
E)  a copyright 
A)  a beautician's license 
B)  a patent 
C)  exclusive ownership of raw materials 
D)  a public franchise 
E)  a copyright

Question 3

Since price __________ for a monopoly firm,the profit-maximizing monopoly firm does not produce the quantity of output for which price equals marginal cost.

Accepted Answer

A)  does not equal marginal revenue 
B)  does equal marginal revenue 
C)  is higher for a perfectly competitive firm than 
D)  is lower for a perfectly competitive firm than 
E)  a and d 
A)  does not equal marginal revenue 
B)  does equal marginal revenue 
C)  is higher for a perfectly competitive firm than 
D)  is lower for a perfectly competitive firm than 
E)  a and d

Question 4

Both a price taker and a price searcher maximize profits or minimize losses by producing the quantity of output at which __________ equals __________.

Accepted Answer

A)  total revenue; total cost 
B)  average total cost; price 
C)  average variable cost; marginal cost 
D)  marginal revenue; marginal cost 
E)  marginal cost; average fixed cost 
A)  total revenue; total cost 
B)  average total cost; price 
C)  average variable cost; marginal cost 
D)  marginal revenue; marginal cost 
E)  marginal cost; average fixed cost

Question 5

Exhibit 24-6
  
-Refer to Exhibit 24-6.The marginal revenue curve of a perfectly competitive firm producing X and selling it at the price P0 is represented by

Accepted Answer

A)  A. 
B)  B. 
C)  C. 
D)  D. 
A)  A. 
B)  B. 
C)  C. 
D)  D.

Question 6

The theory of monopoly assumes that the monopoly firm

Accepted Answer

A)  faces a downward-sloping supply curve that is the same as its marginal revenue curve. 
B)  faces a downward-sloping demand curve. 
C)  produces more than the perfectly competitive firm under identical demand and cost conditions. 
D)  produces a product for which there are many close substitutes. 
E)  none of the above 
A)  faces a downward-sloping supply curve that is the same as its marginal revenue curve. 
B)  faces a downward-sloping demand curve. 
C)  produces more than the perfectly competitive firm under identical demand and cost conditions. 
D)  produces a product for which there are many close substitutes. 
E)  none of the above

Question 7

A monopolist can sell 26,000 units at a price of $10 per unit.Lowering price by $1 raises the quantity demanded by 500 units.What is the change in total revenue resulting from this price change?

Accepted Answer

A)  $21,500 
B)  $12,500 
C)  $65,500 
D)  -$21,500 
A)  $21,500 
B)  $12,500 
C)  $65,500 
D)  -$21,500

Question 8

The U.S.Postal Service is an example of a public franchise.

Accepted Answer

A) True 
 B)False

Question 9

Exhibit 24-10
  
-Refer to Exhibit 24-10.The profit-maximizing single-price monopolist incurs total cost equal to what area?

Accepted Answer

A)  0BCQ1 
B)  0ADQ1 
C)  0AEQ2 
D)  ABCD 
E)  GFC 
A)  0BCQ1 
B)  0ADQ1 
C)  0AEQ2 
D)  ABCD 
E)  GFC

Question 10

Exhibit 24-9
  
-Refer to Exhibit 24-9.A single-price monopolist earns a total profit of __________ when it produces and sells 20 units of its good.

Accepted Answer

A)  $80. 
B)  $100. 
C)  $30. 
D)  $61. 
E)  $49. 
A)  $80. 
B)  $100. 
C)  $30. 
D)  $61. 
E)  $49.

Question 11

Compared to the perfectly competitive firm,the monopolist faces a demand curve that is ___________________ elastic because there are ______________ substitutes for the product produced by the monopolist.

Accepted Answer

A)  less; fewer 
B)  less; more 
C)  more; fewer 
D)  more; more 
A)  less; fewer 
B)  less; more 
C)  more; fewer 
D)  more; more

Question 12

To engage in price discrimination,it is necessary that

Accepted Answer

A)  a seller be a price searcher. 
B)  there be no arbitrage. 
C)  a seller incur different costs for servicing different customers. 
D)  a and b 
E)  all of the above 
A)  a seller be a price searcher. 
B)  there be no arbitrage. 
C)  a seller incur different costs for servicing different customers. 
D)  a and b 
E)  all of the above

Question 13

The seller of good X sells 1,000 units of the good. Each unit is being sold for the highest price each consumer is willing to pay for the good.The seller practices

Accepted Answer

A)  second-degree price discrimination. 
B)  third-degree price discrimination. 
C)  perfect price discrimination. 
D)  marginal revenue pricing. 
E)  rent seeking. 
A)  second-degree price discrimination. 
B)  third-degree price discrimination. 
C)  perfect price discrimination. 
D)  marginal revenue pricing. 
E)  rent seeking.

Question 14

Exhibit 24-4
  
-Refer to Exhibit 24-4. What dollar amounts go in blanks (P),(Q),(R),and (S),respectively?

Accepted Answer

A)  $90;$80; $53.33; and $60 
B)  $10; $0; $28; and $19 
C)  $15; $5; $20; and $10 
D)  $75; $45; $33.33; and $32.50 
A)  $90;$80; $53.33; and $60 
B)  $10; $0; $28; and $19 
C)  $15; $5; $20; and $10 
D)  $75; $45; $33.33; and $32.50

Question 15

Exhibit 24-3
  
-Refer to Exhibit 24-3.The profit of the single-price monopolist is

Accepted Answer

A)  positive. 
B)  zero. 
C)  negative. 
D)  uncertain without more information. 
A)  positive. 
B)  zero. 
C)  negative. 
D)  uncertain without more information.

Question 16

Exhibit 24-6
  
-Refer to Exhibit 24-6.If C is the demand curve facing a perfectly price-discriminating monopolist selling qC units of X,its marginal revenue curve is

Accepted Answer

A)  A. 
B)  B. 
C)  C. 
D)  D. 
A)  A. 
B)  B. 
C)  C. 
D)  D.

Question 17

Exhibit 24-8
  
-Refer to Exhibit 24-8.Average total cost at the profit-maximizing level of output equals

Accepted Answer

A)  $53.00. 
B)  $58.33. 
C)  $59.00. 
D)  $51.50. 
E)  There is not enough information given to answer this question. 
A)  $53.00. 
B)  $58.33. 
C)  $59.00. 
D)  $51.50. 
E)  There is not enough information given to answer this question.

Question 18

Exhibit 24-2
  
-Refer to Exhibit 24-2.Total cost at the profit-maximizing quantity of output is the

Accepted Answer

A)  area 0P2CQ0. 
B)  area 0P3FQ0. 
C)  area 0P1BQ0. 
D)  distance from Q0 to D. 
E)  none of the above 
A)  area 0P2CQ0. 
B)  area 0P3FQ0. 
C)  area 0P1BQ0. 
D)  distance from Q0 to D. 
E)  none of the above

Question 19

Exhibit 24-8
  
-Refer to Exhibit 24-8.The marginal cost of the last unit produced at the profit-maximizing output level equals

Accepted Answer

A)  $8. 
B)  $31. 
C)  $60. 
D)  $15. 
A)  $8. 
B)  $31. 
C)  $60. 
D)  $15.

Question 20

Firm X is a single seller of good X.There are,however,two substitutes for good X.Given this,

Accepted Answer

A)  Firm X cannot be a monopolist because the theory of monopoly assumes there are no close substitutes for the good the single seller sells. 
B)  Firm X can be a monopolist because we do not know if the two substitutes are close substitutes; additionally, it may be that Firm X acts as if the assumption of no close substitutes holds. 
C)  Firm X cannot be a monopolist because if substitutes exist for the good it produces, its demand curve is horizontal and monopolists face downward-sloping demand curves. 
D)  none of the above 
A)  Firm X cannot be a monopolist because the theory of monopoly assumes there are no close substitutes for the good the single seller sells. 
B)  Firm X can be a monopolist because we do not know if the two substitutes are close substitutes; additionally, it may be that Firm X acts as if the assumption of no close substitutes holds. 
C)  Firm X cannot be a monopolist because if substitutes exist for the good it produces, its demand curve is horizontal and monopolists face downward-sloping demand curves. 
D)  none of the above

Exam 24: Monopoly

Suppose the local pharmacy charges lower prices to senior citizens than it charges to younger customers. The pharmacy is practicing

Which of the following is not an example of a legal barrier to entry?

Since price __________ for a monopoly firm,the profit-maximizing monopoly firm does not produce the quantity of output for which price equals marginal cost.

Both a price taker and a price searcher maximize profits or minimize losses by producing the quantity of output at which __________ equals __________.

Exhibit 24-6 -Refer to Exhibit 24-6.The marginal revenue curve of a perfectly competitive firm producing X and selling it at the price P0 is represented by

The theory of monopoly assumes that the monopoly firm

A monopolist can sell 26,000 units at a price of $10 per unit.Lowering price by $1 raises the quantity demanded by 500 units.What is the change in total revenue resulting from this price change?

The U.S.Postal Service is an example of a public franchise.

Exhibit 24-10 -Refer to Exhibit 24-10.The profit-maximizing single-price monopolist incurs total cost equal to what area?

Exhibit 24-9 -Refer to Exhibit 24-9.A single-price monopolist earns a total profit of __________ when it produces and sells 20 units of its good.

Compared to the perfectly competitive firm,the monopolist faces a demand curve that is ___________________ elastic because there are ______________ substitutes for the product produced by the monopolist.

To engage in price discrimination,it is necessary that

The seller of good X sells 1,000 units of the good. Each unit is being sold for the highest price each consumer is willing to pay for the good.The seller practices

Exhibit 24-4 -Refer to Exhibit 24-4. What dollar amounts go in blanks (P),(Q),(R),and (S),respectively?

Exhibit 24-3 -Refer to Exhibit 24-3.The profit of the single-price monopolist is

Exhibit 24-6 -Refer to Exhibit 24-6.If C is the demand curve facing a perfectly price-discriminating monopolist selling qC units of X,its marginal revenue curve is

Exhibit 24-8 -Refer to Exhibit 24-8.Average total cost at the profit-maximizing level of output equals

Exhibit 24-2 -Refer to Exhibit 24-2.Total cost at the profit-maximizing quantity of output is the

Exhibit 24-8 -Refer to Exhibit 24-8.The marginal cost of the last unit produced at the profit-maximizing output level equals

Firm X is a single seller of good X.There are,however,two substitutes for good X.Given this,

What Economics Is About

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Both a price taker and a price searcher maximize profits or minimize losses by producing the quantity of output at which equals .

Exhibit 24-6 -Refer to Exhibit 24-6.The marginal revenue curve of a perfectly competitive firm producing X and selling it at the price P₀is represented by

Compared to the perfectly competitive firm,the monopolist faces a demand curve that is _____ elastic because there are substitutes for the product produced by the monopolist.